What does 'Bear Hug' mean

A bear hug is an offer made by one company to buy the shares of another for a much higher per-share price than what that company is worth. A bear hug offer is usually made when there is doubt that the target company's management is willing to sell.

The name "bear hug" reflects the persuasiveness of the offering company's overly generous offer to the target company.


By offering a price far in excess of the target company's current value, the offering party can usually obtain an agreement. The target company's management is essentially forced to accept such a generous offer because it is legally obligated to look out for the best interests of its shareholders.

A bear hug can be interpreted as a hostile takeover attempt by the company making the offer, as it is designed to put the target company in a position where it is unable to refuse being acquired. Unlike some other forms of hostile takeovers, a bear hug often leaves shareholders in a positive financial situation. The acquiring company may offer additional incentives to the target company to increase the likelihood that it will take the offer.

To qualify as a bear hug, the acquiring company must make an offer well above market value for a large number of a company’s shares. Since the target company is required to look out for the best interest of their shareholders, it is often required to take the offer seriously even if there was no previous intention to change the business model or previous announcement of looking for a buyer.

At times, bear hug offers may be made to struggling companies or startups in hopes of acquiring assets that will have stronger values in the future, though companies that do not demonstrate any financial needs or difficulties may be targeted as well.

Refusal of a Bear Hug Offer

Refusal to take the bear hug offer can potentially lead to a lawsuit being filed on behalf of the shareholders if the target company cannot properly justify the refusal. Since the business has a responsibility to the shareholders, refusing an offer that otherwise may seem too good to be true could be considered a poor decision.

Why Attempt a Bear Hug?

A business may attempt a bear hug in an effort to avoid a more confrontational form of takeover attempt, or one that would require significantly more time to complete.

The offer, though financially favorable, is generally unsolicited by the target company. The acquiring company may use a bear hug to limit competition or acquire goods or services that complement its current offerings.

  1. Bear Fund

    A mutual fund designed to provide higher returns when the market ...
  2. Bear Closing

    Purchasing a security, currency, or commodity in order to close ...
  3. Target Firm

    A target firm is an attractive business for a merger or acquisition ...
  4. Hostile Takeover Bid

    A hostile takeover bid occurs when an entity attempts to take ...
  5. Covered Bear

    A trading strategy in which a short sale is made on a long position. ...
  6. Takeover Bid

    A takeover bid is a corporate action in which an acquiring company ...
Related Articles
  1. Investing

    Prospering In The Next Bear Market: Here's How

    Prepare to survive, and even prosper, in the impending bear market, by considering and putting into action the following four strategies.
  2. Investing

    Don’t Panic When the Next Bear Market Happens

    Take advantage of the next bear market and watch your investment in great companies grow.
  3. Insights

    Digging Deeper Into Bull And Bear Markets

    Discover why it's important to know the characteristics of the two types of market conditions.
  4. Investing

    Bear Market Mutual Funds Are Attracting Investors (BEARX, GRZZX)

    Bear funds take short positions on the market and profit when prices go down.
  5. Investing

    Investotriva: Bear Market

    A financial market with declining asset prices fueled by investors’ pessimism, lack of confidence and negative expectations. While bear markets are partly based on actual investment performance, ...
  6. Financial Advisor

    Preparing Your Clients for the Next Bear Market

    It has been almost six years since the last bear market, so it might be time for advisors to start preparing their clients for the inevitable downturn.
  7. Small Business

    How To Profit From Mergers And Acquisitions Through Arbitrage

    Making a windfall from a stock that attracts a takeover bid is an alluring proposition. But be warned – benefiting from m&a is easier said than done.
  8. Trading

    The Elder-Ray Indicator: Seeing Into the Market

    Elder-ray helps determine the strength of competing groups of bulls and bears.
  9. Investing

    Play the Bear Market With Top Bear Market Funds (EUM)

    Worried of an imminent bear market? Play it safe with these top funds designed to benefit from declines in the stock market.
  10. Trading

    MACD Histogram Helps Determine Trend Changes

    Learn how this momentum indicator is used to determine price action on a stock.
  1. What are the signs of a bear market rally?

    Read about some of the signs of a bear market rally, an unpredictable bull movement that takes place in the middle of a stronger ... Read Answer >>
  2. What are common investing mistakes in bear markets?

    Learn why investing in a tumultuous market can be challenging even for the most experienced investors. Avoiding these common ... Read Answer >>
  3. Where Did the Bull and Bear Market Get Their Names?

    The terms bull and bear are used to describe general actions and attitudes, or sentiment, either of an individual (bear and ... Read Answer >>
Hot Definitions
  1. Money Market

    The money market is a segment of the financial market in which financial instruments with high liquidity and very short maturities ...
  2. Perfect Competition

    Pure or perfect competition is a theoretical market structure in which a number of criteria such as perfect information and ...
  3. Compound Interest

    Compound Interest is interest calculated on the initial principal and also on the accumulated interest of previous periods ...
  4. Income Statement

    A financial statement that measures a company's financial performance over a specific accounting period. Financial performance ...
  5. Leverage Ratio

    A leverage ratio is any one of several financial measurements that look at how much capital comes in the form of debt, or ...
  6. Annuity

    An annuity is a financial product that pays out a fixed stream of payments to an individual, primarily used as an income ...
Trading Center